(Appendix 4B)The Management of Benedict Corporation Would Like to Investigate

question 26

Multiple Choice

(Appendix 4B) The management of Benedict Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 29, 000 machine-hours.In addition, capacity is 36, 000 machine-hours and the actual level of activity for the year is 26, 600 machine-hours.All of the manufacturing overhead is fixed and is $334, 080 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year.A number of jobs were worked on during the year, one of which was Job B04D.This job required 150 machine-hours. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year the amount of manufacturing overhead charged to the Job B04D is closest to:

• A)$1, 392.00
• B)$1, 551.46
• C)$1, 728.00
• D)$1, 883.91

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Definitions:

Monopoly

An economic condition where a single company or entity has exclusive control over a particular industry or product, hence limiting competition.

Monopsony

A market situation where there is only one buyer for many sellers, giving the buyer significant power over prices.

Resource Markets

Resource markets are venues where resources or factors of production (such as labor, capital, and raw materials) are bought and sold, influencing the allocation and distribution of resources in an economy.

Marginal Productivity Theory

An economic principle stating that the addition of a unit of labor or capital increases output to a point, but eventually, additional units will add less output.